How Does Bitcoin Cloud Mining Work?

How Does Bitcoin Cloud Mining Work?

Growing number of people wish to invest their assets in Bitcoin mining without involving too much in managing their hardware. Earning the coins by using the cloud is the best option for such cryptocurrency holders. In general, cloud mining is using the shared computing power from online data centers.

In order to start with this type of mining, it is enough to have a home computer that serves as a communication and some local BTC wallet. Anyway, before engaging in such process, it is essential to learn more about pros and cons of this mining method, meaning that investors should entirely understand how it works.

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Advantages

Here are some of the advantages of cloud mining compared to other types of cryptocurrency mining:

  • As you don't use numerous graphics cards to mine, the temperature in your home will be more cooling, and the noise of the fans is avoided
  • By not using the graphics cards, electricity costs will be much lower, and you won't have any additional electricity costs
  • Once the mining reaches the profitable stage, there is no equipment that needs to be sold
  • As you will not have any warmed up equipment, you won't have any ventilation problems
  • There is no such thing as being disappointed by the equipment that your suppliers sent you

Disadvantages

Here are some of the reasons why miners do not opt for cloud mining:

  • It can be risky because of frauds
  • Hazy and uncertain mining operations
  • If you're someone who loves system building, this method is less fun
  • As the operators have their own costs to cover, the profits are lower
  • Mining operations can cease at some point, which largely depends on the BTC price
  • Flexibility and control is something you will surely lack

Mining profitability

There are numerous ways to calculate your mining profitability, but the problem is that the majority of special web services that are designed to this calculations, work only with the parameters of your hardware and not the ones of cloud-mining. However, many miners still choose to use these web calculators to see the total mining costs involved.

Some profitability calculators, such as Genesis Block, require some info about your electricity costs, and even the info about the initial investment in your hardware in some cases. But, as providers are those who are in charge of paying for the electricity, you can always provide your monthly mining cost in place of your electricity bill.

Speaking of hardware miners, they can manage their monthly cost by increasing the charge for electricity by the power that has been consumed by the unit and by a conversion factor. In the case of cloud mining costs calculations, the process is quite the opposite. Providers are those who provide you the monthly running cost. This means that you have to calculate the cost per kWh in order to feed the calculator.

Profits and risks

Whether you choose cloud mining or any other method, you should be aware that some risks are always present. Making some good profits is possible if miners take a moment to think and decide what would be the best choice for them. By executing numerous test calculations, miners can soon realize that there are some cloud mining services that can be quite profitable for the initial period of several months. However, with the increase in BTC difficulty level, having some losses in 5 months is not uncommon.

One of the solutions to this problem would be reinvesting the amount that has been made into preserving the competitive and economical hash rate, but it cannot be taken for granted, as it's still quite hypothetical and uncertain.

Conclusion

As we already mentioned above, cloud mining method has risks of fraud. So, the best advice to investors would be to invest funds only if they are comfortable with possible risks. It is also advised to do a little research by taking a look at certain social media pages and talk to other customers, making clear and precise questions about investing in cloud mining.

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